BitGo Launches Regulated Token Custody Platform Targeting Web3 Protocols

The custody platform enables crypto-native organizations such as foundations and protocols to programmatically manage native tokens for distribution to investors

Cryptocurrency custodian BitGo has launched a new platform designed to custody and manage native tokens for Web3 protocols, according to a statement from BitGo shared with Cointelegraph on Sept. 16.

The custody platform enables crypto-native organizations such as foundations and protocols to programmatically manage native tokens for distribution to investors, employees, grant recipients and other stakeholders, according to BitGo.

“We're launching a regulated platform to custody and manage native tokens for Web3 protocols, enabling foundations and protocols to seamlessly distribute tokens,” a BitGo spokesperson told Cointelegraph, adding:

“This eliminates the need for Web3 protocols to self-custody tokens in onchain wallets or smart contracts, which can be inefficient and introduces unnecessary pain and complexity, with gaps in security, compliance and transparency.”

Regulated digital asset custodians are gaining traction in the United States among investment managers and fund issuers, but Web3 protocols generally still self-custody tokens in onchain wallets or smart contracts, according to the statement from BitGo.

“By cobbling together a non-custody wallet solution, a smart contract for distribution, and yet another provider for custody, Web3 protocols introduce unnecessary pain and complexity, with gaps in security, compliance and transparency,” the statement reads.

“BitGo's Token Management Platform handles everything from token vesting, unlocking and distribution to staking… liquidity management and even tax reporting,” it continues.

Self-custody minimizes dependence on centralized intermediaries but introduces its own risks, such as cybersecurity exploits and internal misconduct, according to the statement from BitGo.

On Sept. 16, decentralized finance (DeFi) protocol Delta Prime was reportedly hacked for at least $6 million in virtual assets. Additionally, BaseBros Fi, a DeFi protocol on the Base blockchain, allegedly disappeared after stealing user funds through an unaudited smart contract, as previously reported by Cointelegraph.

Crypto in BitGo’s custody is insured up to $250 million “against loss, theft and misuse in situations where we hold all keys,” according to its website. Cybersecurity insurance is standard among regulated US crypto custodians, and several have obtained charters to act as limited purpose trust companies.

On Aug. 14, Fireblocks, best known for its self-custody solutions, obtained a charter to act as a regulated crypto custodian for US clients, as reported by Cointelegraph.

The US Securities and Exchange Commission has been cracking down on crypto investment managers that fail to adhere to rules requiring client funds to be held by qualified custodians, such as a registered broker-dealer or bank.

Through BitGo New York Trust Company, BitGo is among several US firms — including Coinbase Custody Trust, Fidelity Digital Asset Services and Paxos Trust Company — chartered by the state of New York to custody crypto for US clients.